Health care providers will often try to negotiate and receive fair, commercially reasonable business terms with vendors and suppliers, to both better serve their patients and improve their “bottom line.” Yet when it comes to services reimbursed by the government — be it Medicare, Medicaid, or TRICARE — what exactly those terms are and how they are structured could affect whether a provider and vendor negotiate themselves into liability under the False Claims Act.

Last week, the U.S. Department of Justice (U.S. Attorney, Northern District of Texas) and Reliant Rehabilitation Holdings settled a False Claims Act lawsuit brought by a whistleblower, a former Reliant employee, for $6.1 million, over improper inducements allegedly offered by Reliant to nursing homes in order to secure the nursing homes’ therapy business. That business included providing rehabilitation therapy services to nursing home residents covered by the Medicare Part A program, which reimburses nursing homes for among other things rehabilitation therapy provided to those residents. To secure that business, according to the U.S. Attorney, Reliant allegedly assigned a nurse practitioner to the nursing homes “without charge or for a minimal, below market fee, in order to induce or reward nursing homes for contracting with Reliant to provide rehabilitation therapy for their residents.” In addition, Reliant allegedly paid nursing facility physicians “above fair market compensation for supervising and collaborating with Reliant nurse practitioners in exchange for the facilities’ therapy business.” Those arrangements, characterized as “kickbacks,” allegedly “caused” the submission of “false” Medicare Part A claims by the nursing homes in violation of the Anti-Kickback Statute and the False Claims Act. (The nursing homes were not named as defendants in the lawsuit.)

Significantly, there was no allegation made that Reliant had rendered, or that the nursing homes were reimbursed for, excessive or medically unnecessary therapy to the facilities’ Part A residents. Nor was there a claim that Reliant or the nursing homes had “upcoded” residents’ “RUG” scores or overstated residents’ medical acuity in order to increase Medicare reimbursement. Rather, it was alleged that the inducements had unduly influenced the selection of Reliant over rival therapy vendors and thus “tainted” all of the nursing homes’ Part A therapy claims.

The U.S. Attorney explained that the alleged FCA liability resulting from these arrangements is based not on excessive reimbursement dollars paid by Medicare but on their subordinating the best interests of Medicare residents to the vendor’s financial interests:

Companies that work to secure patient referrals by providing kickbacks inject improper financial considerations into our healthcare system. . . . Today’s settlement demonstrates our determination to thwart such improper inducements whether they take the form of cash payments or free services.

Paying illegal remuneration to nursing homes and doctors to increase the bottom line . . . too often sacrifices the best interests of patients to profit-making schemes. . . . Patients and taxpayers deserve better.

* * *

Providers can continue to evaluate and select vendors on such terms as the quality and reliability, as well as the price, of services being offered by prospective vendors and suppliers. However, entertaining offers from prospective vendors or suppliers for free or discounted services, or conversely compensation for nominal services or above-market compensation for services other than those being contracted for, could be problematic; such offers could have the intent if not effect of skewing the contracting process and steering the selection toward one vendor over another, rival vendor better suited to meet the needs of the Medicare or Medicaid beneficiaries being served the provider. Indeed, as the DOJ’s settlement with Reliant illustrates, those forms of remuneration can present a serious risk of FCA liability – for both the provider and vendor.

Two federal appellate-court decisions handed down in the past few weeks have generated much speculation about whether “medical necessity” determinations underlying Medicare or Medicaid claims can now be considered “objectively false” — despite conflicting medical-expert opinions — and actionable under the False Claims Act (FCA). The most recent opinion was issued on July 9, 2018, in United States ex rel. Polukoff v. St. Mark’s Hospital (“Polukoff”). Polukoff involved two cardiac surgical procedures reimbursed by Medicare, each of which involved the closing of a hole between the two upper chambers of the heart. In reversing the District Court below, the Tenth Circuit Court of Appeals in Polukoff, reading the FCA “broadly,” concluded that the procedures, challenged as medically unnecessary, can form the basis for FCA liability. Similarly, on June 25, 2018, the Sixth Circuit Court of Appeals, in United States of America v. Paulus, sustained a jury verdict in a criminal action against a cardiologist for health care fraud and making false statements, for having billed Medicare also for allegedly medically unnecessary procedures — implanting stents — based on angiograms showing some blockage of patients’ coronary arteries.

The opinions in Polukoff and Paulus came down just as the Eleventh Circuit Court of Appeals is considering the appeal in United States of America v. GGNSC Admin. Servs., known as the AseraCare case. AseraCare involved FCA claims for hospice care based on allegedly false certifications, completed by physicians, that the hospice patients had a life expectancy of six months or less. In granting summary judgment dismissing the lawsuit, the District Court opined: “If the Court were to find that all the Government needed to prove falsity in a hospice provider case was one medical expert who reviewed the medical records and disagreed with the certifying physician, hospice providers would be subject to potential FCA liability any time the Government could find a medical expert who disagreed with the certifying physician’s clinical judgment.”

Some have questioned whether the lower court’s holding in AseraCare can be sustained on appeal if the Eleventh Circuit were to follow the precedents in Polukoff and Poulus. Such a reading of those decisions, however, may be too broad-brush, by essentially treating all medical necessity determinations alike, for purposes of FCA liability, and equally vulnerable to challenge as “objectively false.” There are critical differences between the cardiology surgical procedures at issue in Polukoff and Poulus, on the one hand, and the certifications of hospice eligibility in AseraCare, on the other hand. The latter each rest not only on a medical diagnosis, but on a physician’s prognostication that the patient will not live longer than six months. Such a judgment is more inherently subjective in nature, requiring both a professional assessment of objective medical facts, concerning the patient’s diagnosis and condition, and a projection into the future of the likely course or progression of the underlying disease or condition.

Other “medical necessity” determinations, which call for forecasting the likely benefits of, for instance, rehabilitation therapy or other prescribed treatments over time, are similarly difficult to characterize as “objectively false” — without, of course, the benefit of hindsight. Those types of medical judgments, in large part, involve making an educated guess, where medical experts can and often do differ, and can reach, in good faith, conflicting medical opinions.

The Sixth Circuit concluded that the agency’s former employee, who filed the FCA action, had sufficiently alleged that (i) the timely submission of physician certifications was “material to the Government’s decision to make the payment,” and (ii) the defendants had knowledge—or at least acted with “reckless disregard”—that the Medicare claims may not comply with the applicable Medicare regulations governing payment. The FCA action was allowed to go forward on that basis alone, even though there was no allegation that the home care services were not medically necessary or were not provided, or that the home health agency had backdated certifications, submitted claims with unsigned certifications, or withheld any information from Medicare.

This case highlights the need for providers to implement robust compliance policies and procedures to ensure that mere technical violations of the regulations do not mature into full-blown FCA violations.

Earlier this month, the federal District Court for the Northern District of Illinois, in U.S. ex rel. Derrick v. Roche Diagnostics Corp., sustained a whistleblower, or qui tam, complaint under the False Claims Act filed by a discharged employee of a manufacturer of glucose-testing products, and brought against the manufacturer and a Medicare Advantage (managed care) plan, asserting violations of the anti-kickback statute. The whistleblower alleged that the manufacturer (Roche Diagnostics) had compromised an earlier claimed debt owed to it by the Medicare Advantage plan (Humana) – the so-called “remuneration” or kickback – in exchange for being restored to the plan’s formularies for glucose-testing products covered by Medicare.

Significantly, Medicare paid the managed care plan a fixed, or capitated, monthly amount for all covered health and medical services provided or arranged for each plan enrollee, and no allegation was made that the alleged kickback arrangement with the manufacturer had increased costs to the Medicare program or resulted in the over-utilization of the blood-testing products at the expense of the program. Rather, the whistleblower, or “relator,” essentially alleged that the claims for monthly capitation payments submitted by the Medicare Advantage plan “were tainted by the alleged fraud” associated with the arrangement.

Key Takeaways

The court’s decision is a stark reminder that health care transactions in managed care programs under Medicare or Medicaid can present risks under the anti-kickback statute and False Claims Act, and the risks are not limited to alleged upcoding of risk-adjustment scores to secure higher capitation payments for the managed care plan. Nor does an alleged kickback arrangement have to result in overutilization of services or increased costs to the Medicare or Medicaid programs – a scenario more typical in the traditional fee-for-service environment. Rather, the alleged fraud can be premised on the allegation that the “kickback” unduly influenced or steered the managed care plan to select a particular manufacturer’s products or provider’s services covered by the plan’s capitation payments. That same risk could arise in the context of other “all-inclusive” pricing or bundled payment models, where the selection of a particular vendor or participating provider might be similarly tainted by an improper inducement.

The managed care “safe harbor” under the anti-kickback statute, the court held, did not immunize the alleged kickback arrangement to secure the manufacturer’s products on the plan’s formularies. Extending the logic of that holding, the managed care safe harbor would not protect any other improper remuneration or kickbacks offered by providers seeking to participate in a managed care plan’s network, or by suppliers wishing to secure contracts to sell their products, utilized by plan enrollees.

The forgiveness of debt from an earlier or unrelated transaction may be deemed a form of “remuneration”, as broadly defined under the anti-kickback statute to include anything of value. In this case, the managed care plan had actually disputed the manufacturer’s claim, and the manufacturer and the plan then engaged in negotiations to resolve the dispute – what the manufacturer characterized as “simply a routine, arms-length compromise involving a disputed contractual obligation.” Nevertheless, the court found the whistleblower’s allegation – that the manufacturer’s willingness to compromise the claimed debt was intended to induce the managed care plan to restore the manufacturer’s products on the plan’s formularies – was sufficient, as a matter of law, to allow the False Claims Act case to go forward into the discovery phase.

The former employee’s claim of retaliatory discharge under the False Claims Act, asserted against the manufacturer employer, was also sustained based on the asserted nexus – in this case, the coincidence of timing – between the employee’s raising concerns to her supervisors about a potential anti-kickback violation and her termination shortly afterwards.

In an important break with the majority of case precedents, the United States Court of Appeals for the Fifth Circuit, reversing the District Court below, held that a Medicare provider, facing a $7.6 million recoupment for alleged overpayments, can file suit in federal court and seek an injunction against ongoing recoupments, even though the provider had not yet fully exhausted its administrative remedies. Family Rehabilitation, Inc. v. Azar, U.S.C.A., 5th Cir. March 27, 2018. (“Family Rehab”).

The “exhaustion of administrative remedies” requirement — that a person or entity aggrieved by a governmental action cannot file a lawsuit challenging the action before completing all avenues for appeal before the governmental agency — is a bedrock principle of administrative law and a formidable barrier to accessing the courts. Last year, we posted an article about a federal district court’s decision in MedPro Health Providers, LLC v. Hargan (“MedPro”), filed in the Northern District of Illinois, that addressed this principle in the context of a Medicare audit and recoupment. In that case, like the Family Rehab case, a home care agency challenged the recoupment of alleged Medicare overpayments determined by an audit contractor for the federal Centers for Medicare and Medicaid Services (CMS), known as a “Zone Integrity Program Contractor” or ZPIC. The Court in MedPro turned aside the home care agency’s lawsuit and request for injunctive relief, holding that the Court lacked jurisdiction until the provider had gone through and completed the prescribed four-step administrative-appeal process.

The home care agency in Family Rehab was also audited by a ZPIC and mired in the same, “byzantine” four-step administrative appeal process. The “colossal backlog” of “thousands” of administrative appeals pending before CMS, and the associated delay, did not go unnoticed. The Fifth Circuit observed that it would take, by the federal government’s own estimate, “at least another three to five years” before the appeals process would be completed. (Emphasis in original.) In the meantime, CMS had begun recouping the $7.6 million in alleged Medicare overpayments from the home care agency. The provider argued that absent a court-ordered stay, it might be forced to shut down its operations and file for bankruptcy.

The Fifth Circuit addressed three discrete exceptions recognized by the courts to the exhaustion of administrative remedies, or “channeling,” requirement, and determined that one of them, the “collateral claim” exception, applied in this case. Under the collateral-claim exception, a court can exercise jurisdiction before all administrative appeals have been exhausted if (i) the claims being raised in the lawsuit are “entirely collateral” to the underlying bases for the government agency’s action, and (ii) “full relief cannot be obtained at a post-deprivation hearing.” With regard to the first element, the Fifth Circuit noted that a court would not need to “immerse itself” in, or “wade through,” the patient eligibility certifications completed by the home care agency found deficient by the ZPIC, in order to resolve the home care agency’s legal claims of “procedural due process” and “ultra vires.” As the Fifth Circuit noted, “those claims only require the court to determine how much process is required under the Constitution and federal law before recoupment.” The appellate court further explained that “Family Rehab does not seek a determination that the recoupments are unlawful under the Medicare Act” and thus “raises claims unrelated to the merits of the recoupment.”

With regard to the second “irreparable injury” element to the collateral-claims exception, the Fifth Circuit pointed to the home care agency’s contention that it would be forced to go out of business and file for bankruptcy, which would “have detrimental effects on its employees and patients.” On those bases, the Fifth Circuit held that the court could exercise jurisdiction over the home care agency’s “collateral” procedural due process and ultra vires claims and, if warranted, grant an injunction against ongoing recoupments.

The Court of Appeals, however, rejected the other two exceptions to the exhaustion requirement advanced by the home care agency: (a) the alleged futility of the administrative appeals process; and (b) the court’s exercise of “mandamus” jurisdiction, premised on a request to compel a government officer to perform a non-discretionary duty. Regarding “futility,” the Fifth Circuit noted that this exception is “narrow” and that delay alone, however substantial or prejudicial, is insufficient without also showing that administrative review was a “legal impossibility.” The Circuit Court also held that the home care agency had not specifically requested mandamus relief in its court complaint and, accordingly, rejected that alternative basis for court jurisdiction.

Key Takeaway: At bottom, a Medicare or Medicaid provider — faced with a substantial recoupment and delay in CMS’ administrative appeals process — may be able to petition a court to stop ongoing recoupments if it can fashion credible, “collateral” claims, such as procedural due process and ultra vires, that do not call upon the court to assess the merits of the underlying overpayment findings still being addressed at the administrative level.

The U.S. Attorney for the Southern District of Florida recently intervened in a whistleblower lawsuit brought under the federal False Claims Act, alleging fraudulent billing by a pharmacy reimbursed by the federal government. (U.S. ex rel. Medrano v. Diabetic Care Rx, LLC, No. 15-cv-62617, S.D. Fla.)

What makes this case significant is that the U.S. Attorney has also named a private equity (PE) firm as a defendant. This attempted extension of False Claims Act liability to a PE firm should serve as a cautionary tale about the risks to private equity invested in the health care space, for a portfolio company’s management decisions and business operations implicating the fraud and abuse statutes applicable to the Medicare, Medicaid and TRICARE programs.

Northern District of Ohio Judge Dan Polster, boldly asserting that he would attempt to resolve the opioid crisis because federal, state and local governments had failed to do so — presided over a wide-ranging status conference on January 11 in the opioid MDL assigned to him.

In November 2017, a panel of federal judges decided to combine the more than 100 separate actions filed by various local government agencies against the pharmaceutical industry into a single Multi District Litigation in the Northern District of Ohio. The case was assigned to Judge Dan Polster, a former federal prosecutor and twenty year veteran of the federal bench who plainly announced that he intended to extract a quick and global settlement in the actions so that the harms caused by the opioid crisis, including insufficient treatment resources could be addressed.

In a hearing surprising for its candor and attention to the bottom line, Judge Polster apportioned blame for the current crisis to every party involved, including the government plaintiffs, noting that each shared responsibility for causing the crisis, which he dubbed “100% man made.” He portrayed the federal court system as an illogical place to solve the crisis but indicated his determination to do the job because all of the other parties had failed, telling the assembled lawyers that “I intend to do something meaningful to abate this crisis and to do it in 2018.”

At Wednesday’s status conference, the judge exhorted the parties to settle quickly so that resources could go where needed. He and Magistrate Judge David Ruiz, acting as special master, met separately with the plaintiffs and defendants to discuss the relative merits and weaknesses of the case as he saw them. According to participant at the hearing, the judge is somewhat uninformed about the details of the closed system of distribution through which opioid sales are made, and is considering holding an “information day” at the end of this month so that the parties can provide relevant information about drug manufacture and distribution to the court. In what is perhaps an indication of how wide-reaching Judge Polster considers his duty to resolve these cases and end the crisis, he indicated that he would urge the Drug Enforcement Administration to attend the information session and give its views. He also invited two separate sets of state Attorneys General to participate in the information day hearing and consider participating in settlement discussions so that defendants would not have to fear successive lawsuits by non-party states after the MDL settled.

It remains to be seen whether Judge Polster can rein in a case this large with parties this disparate. He is determined to try though, and has put a deadline on his efforts. He announced that if the parties had not settled the suits by the end of the year, he would try the cases brought by the Ohio plaintiffs as a single bellwether trial in 2019.

In a separate but related development, on January 9, 2018, Judge Terence Kern, a federal judge in Oklahoma, granted an injunction halting a first-of-its-kind lawsuit by the Cherokee nation filed in Tribal Court. Judge Kern held that the Cherokee Nation Tribal Court lacked jurisdiction to hear claims asserted against the nonTribal defendants including the big three distributors as well as three national retail drug chains.. He enjoined the Attorney General of the Cherokee Nation and the judge assigned to the case in Tribal Court from allowing the Cherokee Nation’s case to proceed.

On October 19, 2017, the United States District Court for the Northern District of Illinois, in the case of MedPro Health Providers, LLC v. Hargan, dismissed a home care agency’s suit — without deciding the merits of the agency’s challenge to a Medicare contractor’s determination to suspend the agency’s Medicare payments. Noting that the delay in adjudication was “unfortunate,” the District Court nevertheless held that the home care agency had to exhaust its administrative remedies prior to filing suit. The provider thus had to first let the administrative process play out to conclusion even while its Medicare payments were cut off and the alleged overpayments continued to be recouped.

Regulatory Background. The Centers for Medicare & Medicaid Services (“CMS”) and its contractors may temporarily suspend Medicare reimbursement payments to providers for up to 180 days if they possess “reliable information that an overpayment exists” — even in the absence of any suspected fraud. 42 C.F.R. § 405.371(a)(1). A provider has the right to submit to the Medicare contractor, a rebuttal statement explaining why the suspension should be lifted, and the contractor is required to review and consider the statement when determining if the suspension should continue. Id. at 405.372(b)(2); 405.375(a). If CMS or its contractor determines to continue the suspension, it must provide written notice to the provider. Id. at 405.375(b)(2). The suspension will not be rescinded until CMS or its contractor finally determines whether the provider was overpaid. The suspended payments would then be released to the provider, less the amount of any overpayment. Id. at 405.372(c)(1)(ii) and (e). A provider may then appeal the subsequent overpayment determination through a four-part administrative process, and ultimately to the Medicare Appeals Council. It is only after the four-step process has been exhausted and the Council had rendered its decision that CMS’ action can be challenged in court. Id. at 405.904(a)(2); 405.1130.

Factual Background. MedPro Health Provider (“MedPro”) is a home health agency authorized to provide services to Medicare beneficiaries. AdvanceMed Corporation is a Zone Program Integrity Contractor (“ZPIC”) that has contracted with CMS to identify suspected cases of Medicare fraud and prevent the mistaken overpayment of Medicare funds to health care providers. The ZPIC reviewed 32 MedPro patient charts in 2016 and notified MedPro that it was suspending future Medicare payments to the company on the grounds that its review revealed that MedPro had billed Medicare for services that were not medically reasonable or necessary. MedPro provided the ZPIC with a rebuttal statement and supporting documentation but, as alleged in MedPro’s complaint, ZPIC determined to continue the suspension even though it admitted that it had not reviewed or considered the supporting documentation.

Shortly after the ZPIC’s suspension determination, MedPro filed a lawsuit in U.S. District Court against the Secretary of the U.S. Department of Health and Human Services and the ZPIC, alleging that the ZPIC’s refusal to review the supporting documentation violated regulations and effectively deprived MedPro of its right of administrative review. For relief, MedPro asked the Court to compel CMS to immediately review its rebuttal statement and supporting documentation, and to declare that the ZPIC had committed fraud by representing that it would, and failing to, review such documentation as required. The ZPIC moved to dismiss the complaint on the ground that MedPro had failed to exhaust administrative remedies.

After the suit was filed, the ZPIC terminated the payment suspensions and notified MedPro that it determined that MedPro had been overpaid by $6.9 million.

The Court’s Decision. By decision dated October 19, 2017, the court granted the defendants’ motion to dismiss for lack of subject-matter jurisdiction. The Court explained that MedPro could have raised the ZPIC’s failure to review the rebuttal submission as a ground for administrative appeal of the ZPIC’s overpayment determination. The court acknowledged that the delayed review “and the resulting hardship” to MedPro resulting from having to wait until the ZPIC made its overpayment determination was “unfortunate.” Nevertheless, the court concluded that MedPro was required to exhaust the administrative process before resorting to the courts, and that it lacked authority at that stage to compel the ZPIC to review MedPro’s rebuttal submission.

The court also determined that MedPro’s related fraud claim, premised on the ZPIC’s failure to review MedPro’s rebuttal submission, was “bound up with a claim for benefits under the [Medicare] Act . . . and a challenge to the ultimate overpayment determination.” Accordingly, the court held that this claim too must be addressed through the administrative process and could not be adjudicated separately from the underlying reimbursement claim.

Implications. This decision highlights the formidable hurdle that exhaustion of administrative remedies can present for a provider seeking relief from the court when operating under a suspension of Medicare payments. The exhaustion requirement was enforced in this case even when the provider challenged the Medicare contractor’s compliance with the very procedures prescribed to ensure a meaningful administrative review. Although a Medicare suspension of payments can cripple a health care provider, the immediacy of such harm does not excuse a provider from first following the prescribed administrative procedures to challenge the underlying overpayment determination. It may be high time to consider the efficacy and fairness of the backlogged Medicare administrative appeal process that can often leave providers with no meaningful relief.

Last week, President Trump declared the opioid crisis a public health emergency. The President’s opioid Commission has now issued its final report with recommendations on how to combat the country’s drug crisis. While both important, neither have a significant impact on law enforcement efforts to address the crisis. That impact will likely come from public reaction to reports suggesting that a 2016 law stripped the Department of Justice (“DOJ”) and Drug Enforcement Administration (“DEA”) of certain police powers to enforce the nation’s drug laws.

Congress passed the Ensuring Patient Access and Effective Drug Enforcement Act (the “Act”) in the Spring of 2016 with little fanfare, and with unanimous consent in the House and Senate. Over one year later, the Act is the subject of great debate and the source of tension among lawmakers, law enforcement, pharmaceutical manufacturers, distributors and wholesalers, and public health advocates.

Before the Act’s passage, DEA regulations permitted the DEA Administrator to issue an immediate suspension order (“ISO”) of a DEA-registered business or health care provider where there was an “imminent danger to the public health or safety.” However, “imminent danger” was not defined, and was subject to loose and inconsistent interpretation. In seeking ISOs, DEA conducted historical analyses of a registered entity’s sales and would claim that the volume of orders, coupled with a failure to report suspicious orders, constituted the requisite “imminent danger” to the public. This finding, which was not subject to judicial review, would temporarily strip a registered business or health care provider of its license to manufacture, distribute or dispense controlled substances pending a hearing before a DEA administrative law judge. Unhappy that DEA could claim “imminent danger” based on past practices, without regard to remedial measures the registered business might have taken, industry lobbyists urged lawmakers to enact a statute that would more clearly define “imminent danger”[1] and would allow a company to present a remedial action plan prior to the imposition of an immediate suspension order.

Critics, led by a former DEA insider-turned-whistleblower, whose allegations were aired in a recent 60 Minutes-Washington Post report, say that the new Act eviscerated DEA’s ability to stop the illegal flow of addictive opioid medications to the public. They claim that “[t]he new law makes it virtually impossible for the DEA to freeze suspicious narcotic shipments from the companies.[2] Similarly, advocates for increased government crack-downs argue that the Act’s new meaning of “imminent danger” and heightened evidentiary standard requires DEA to pierce through “too many levels between distributors and manufacturers to logically establish any causation of death, serious bodily harm, or abuse to a specific patient down the chain to support” an ISO. [3] The reaction to the whistleblower’s allegations was explosive. Among other things, it led to the withdrawal of President Trump’s nomination of Representative Tom Marino of Pennsylvania, a sponsor of the Act, to be the nation’s next drug czar. There is surely more fallout from the Sixty Minutes-Washington Post piece, and it will likely result in scaling back of the Act.

Meanwhile, the President’s Commission on Combating Drug Addiction and the Opioid Crisis (the “Commission”), which will release its final report tomorrow, recommended numerous enforcement measures to combat the opioid epidemic. For example, the Commission suggests that DEA require prescribers to participate in continuing education to better understand the potential for drug misuse before their registrations to prescribe opioids can be renewed. In addition, the Commission urges the President to endorse the federal Prescription Drug Monitoring Act, which requires states that receive federal grants to track and actively manage controlled substances through a state-wide prescription drug monitoring program (“PDMP”). As an alternate to enforcement, the Commission also calls for drug courts in every federal district nationwide. The Commission expects that drug courts will advance individuals’ treatment and recovery efforts, while saving enforcement efforts for those in the medical supply chain that manufacture, distribute, prescribe and dispense large volumes of opioids in the first instance. Finally, the DOJ has leaned on its Corporate Fraud Strike Force and the Opioid Fraud and Abuse Detection Unit to ferret out opioid-related health care offenses and to hold responsible actors accountable.

As the DOJ and DEA retool and consider new enforcement measures, the following industry participants must remain alert:

Doctors: DOJ and DEA will prioritize identifying doctors who overprescribe opioids or who prescribe them without a legitimate medical purpose. Both agencies are well-equipped to seek out not only doctors who overprescribe opioids by providing weeks’ worth of pills when only a few days are necessary, but also other doctors who operate lucrative “pill mills” that distribute opioids for non-medical reasons.

Pharmacists: Pharmacists are on the front line of providing medical care and have a corresponding responsibility to ensure that prescriptions are legitimate. Accordingly, pharmacists must exercise a high degree of professional judgment when assessing a patient’s condition and that patient’s need to use opioids to treat a condition. Pharmacists should be familiar with PDMP systems and know how to balance patient pain with overprescribing opioids. Concomitantly, chains that employ pharmacists have an obligation to educate and train their pharmacists on the safe use of opioids and the potential for misuse and abuse and will bear responsibility for a pharmacist’s failure to detect illegitimate opioid prescriptions.

Manufacturers and Wholesalers:DOJ and DEA will continue to monitor large pharmaceutical companies’ business practices to identify any drug makers who illegally incent doctors to overprescribe opioids, commit fraud on insurance companies, employ deceptive marketing techniques that deceive patients, or who fail to detect and report suspicious orders.

In sum, the opioid crisis, while largely viewed as a health crisis, has important enforcement impacts that are likely to affect industry in a number of ways.

Tom Price is out as Secretary of the U.S. Department of Health and Human Services (“HHS”). Mr. Price announced his resignation on September 29th as he faced more questions and increasing scrutiny over his use of taxpayer-funded private planes. While Mr. Price’s departure from HHS will impact some aspects of the Trump Administration’s health care agenda, health care enforcement and compliance issues are bi-partisan in support and therefore less volatile.

Under Inspector General Daniel Levinson, who has led HHS’ Office of Inspector General (“OIG”) for twelve years, HHS remains committed to detecting, preventing, and prosecuting individuals and companies for health care fraud. Accordingly, all signs point to OIG continuing to focus on detecting fraudulent billing practices and illegal physician referral programs, and using corporate integrity agreements to ensure that health care providers obey Medicare and Medicaid rules and policies.

In addition to fighting fraud in HHS programs, Health Information Portability and Accountability Act (“HIPAA”) security and cyber security are top priorities for HHS’ Office for Civil Rights (“OCR”). To combat cyber security threats and to mitigate damage caused by cyber security breaches, OCR will likely increase its enforcement of HIPAA privacy rules and regulations and scrutinize providers’ cyber security policies, best practices, and response procedures. Driving home this point, new OCR Director Roger Severino said, “I’ve gotten up to speed on HIPAA, and as the threats evolve, we have to evolve in how we approach it – and we have to be smart about who we target. At most I will say the big, juicy case is going to be my priority and the methods for us finding it – stay tuned.”[1]

Tom Price’s departure as HHS Secretary is significant for other important aspects of health care, including the future of the Affordable Care Act and the Medicare and Medicaid bundled payment models. However, current HHS and DOJ enforcement programs remain a priority under President Trump and Attorney General Sessions.